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Diebold may leave e-voting business

Diebold, the makers of touch-screen e-voting machines at the center of a fairlylargenumber of votingproblems and controversies in the US, may be considering getting out of the e-voting business. According to the company's recent annual report filed with the Securities and Exchange Commission (SEC), Diebold—which also makes safes and ATM machines for banks—is concerned about its e-voting subsidiary tarnishing the company's 150-year reputation. Diebold acquired its e-voting business in 2002 when it bought Global Election Systems.

"This is a company that has built relationships with banks every day of every year. It pains them greatly to see their brand tarnished by a marginal operating unit," investment analyst Gil Luria told the Associated Press. The company blamed part of its e-voting problems on changes in emerging elections technology as well as inconsistencies between state and federal governments for e-voting requirements. They also acknowledged that recent complaints about its e-voting machines have hurt the company's relationship with government officials.

Considering that Diebold's ATM division accounts for 63 percent of the company's profit, Diebold needs to evaluate whether the negative publicity surrounding its e-voting machines is hurting the bulk of its business. If banks begin to doubt Diebold's commitment to reliability and security as a result of the voting machine controversies, then the business could take a revenue hit over the years from lost business. Luria believes that Diebold will decide to divest, saying that the probability of Diebold's holding on to it is "very low."

Diebold's poor e-voting reputation can't just be attributed to the poor performance of its hardware, however. Some of its executives have been accused of outright lying to government officials, leading to the company being investigated for criminal activity and the decertification of some machines in the state of California. Diebold was eventually sued by California's Attorney General for fraud. Instead of acknowledging the problems, Diebold appeared to stonewall at every opportunity, which contributed to the widespread distrust of the company.

A spokesman for Diebold, Mike Jacobsen, told the AP that the company looks for growth, profitability, and other characteristics when examining one of its businesses. Diebold's electronic voting unit comprises the company's smallest subsidiary, but was still responsible for 12 percent of the company's profit in 2006 despite the company's poor reputation. However, some states have begun to take steps outlawing touch-screen machines in favor of optical scan options, and other states may soon follow suit. There is also federal legislation being considered that would require electronic voting machines to produce paper trails—a capability that some of Diebold's machines do not currently have. Because of these legal developments, Diebold's e-voting unit may indeed have a bleak future ahead in terms of growth and profitability. Diebold is expected to make an announcement about its long-term strategy for the e-voting unit sometime "early" this year, but the exact time frame for the announcement is unclear.

Jon Stokes contributed to this report.

Jacqui Cheng
Jacqui is an Editor at Large at Ars Technica, where she has spent the last eight years writing about Apple culture, gadgets, social networking, privacy, and more. Emailjacqui@arstechnica.com//Twitter@eJacqui